Senate File 261 - Reprinted SENATE FILE 261 BY COMMITTEE ON WAYS AND MEANS (SUCCESSOR TO SSB 1082) (As Amended and Passed by the Senate March 15, 2011 ) A BILL FOR An Act relating to the technical administration of the tax 1 and related laws by the department of revenue, including 2 the administration of income taxes, sales and use taxes, 3 franchise fees, property taxes, the environmental protection 4 charge, and notification of annexation or severance by 5 cities and including retroactive applicability provisions. 6 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 7 SF 261 (3) 84 tw/sc

S.F. 261 DIVISION I 1 INCOME TAXES 2 Section 1. Section 2.48, subsection 3, paragraph a, 3 subparagraph (2), Code 2011, is amended to read as follows: 4 (2) The tax credits for increasing research activities 5 available under sections 15.335 , 15A.9 , 422.10 , and 422.33 . 6 Sec. 2. Section 15.119, subsection 2, paragraph c, Code 7 2011, is amended by striking the paragraph. 8 Sec. 3. Section 15.293A, subsection 2, paragraph f, Code 9 2011, is amended to read as follows: 10 f. A tax credit shall not be claimed by a transferee 11 under this section until a replacement tax credit certificate 12 identifying the transferee as the proper holder has been 13 issued. The transferee may use the amount of the tax credit 14 transferred against the taxes imposed in chapter 422, divisions 15 II , III , and V , and in chapter 432 , and against the moneys and 16 credits tax imposed in section 533.329 , for any tax year the 17 original transferor could have claimed the tax credit. Any 18 consideration received for the transfer of the tax credit shall 19 not be included as income under chapter 422, divisions II , III , 20 and V , under chapter 432 , or against the moneys and credits tax 21 imposed in section 533.329 . Any consideration paid for the 22 transfer of the tax credit shall not be deducted from income 23 under chapter 422, divisions II , III , and V , under chapter 24 432 , or against the moneys and credits tax imposed in section 25 533.329 . 26 Sec. 4. Section 15.329, subsection 3, Code 2011, is amended 27 by striking the subsection. 28 Sec. 5. Section 15.333, subsection 1, paragraph b, Code 29 2011, is amended by striking the paragraph. 30 Sec. 6. Section 15.393, subsection 2, paragraph a, 31 subparagraph (3), Code 2011, is amended to read as follows: 32 (3) After verifying the eligibility for a tax credit under 33 this paragraph “a” , the department of economic development 34 shall issue a film, television, and video project promotion 35 -1- SF 261 (3) 84 tw/sc 1/ 10

S.F. 261 program tax credit certificate to be attached to the person’s 1 tax return. The tax credit certificate shall contain the 2 taxpayer’s name, address, tax identification number, the date 3 of project completion, the amount of credit, other information 4 required by the department of revenue, and a place for the name 5 and tax identification number of a transferee and the amount 6 of the tax credit being transferred. Tax credit certificates 7 issued under this paragraph “a” may be transferred to any person 8 or entity. Within ninety days of transfer, the transferee 9 shall submit the transferred tax credit certificate to the 10 department of revenue along with a statement containing the 11 transferee’s name, tax identification number, and address, 12 and the denomination that each replacement tax credit 13 certificate is to carry and any other information required by 14 the department of revenue. Within thirty days of receiving 15 the transferred tax credit certificate and the transferee’s 16 statement, the department of revenue shall issue one or more 17 replacement tax credit certificates to the transferee. Each 18 replacement tax credit certificate must contain the information 19 required for the original tax credit certificate and must have 20 the same expiration date that appeared in the transferred 21 tax credit certificate. Tax credit certificate amounts 22 of less than the minimum amount established by rule of the 23 department of economic development shall not be transferable. 24 A tax credit shall not be claimed by a transferee under this 25 paragraph “a” until a replacement tax credit certificate 26 identifying the transferee as the proper holder has been 27 issued. The transferee may use the amount of the tax credit 28 transferred against the taxes imposed in chapter 422, divisions 29 II , III , and V , and in chapter 432 , and against the moneys and 30 credits tax imposed in section 533.329 , for any tax year the 31 original transferor could have claimed the tax credit. Any 32 consideration received for the transfer of the tax credit shall 33 not be included as income under chapter 422, divisions II , III , 34 and V , under chapter 432 , or against the moneys and credits tax 35 -2- SF 261 (3) 84 tw/sc 2/ 10

S.F. 261 imposed in section 533.329 . Any consideration paid for the 1 transfer of the tax credit shall not be deducted from income 2 under chapter 422, divisions II , III , and V , under chapter 3 432 , or against the moneys and credits tax imposed in section 4 533.329 . 5 Sec. 7. Section 15.393, subsection 2, paragraph b, 6 subparagraph (2), Code 2011, is amended to read as follows: 7 (2) After verifying the eligibility for a tax credit under 8 this paragraph “b” , the department of economic development 9 shall issue a film, television, and video project promotion 10 program tax credit certificate to be attached to the person’s 11 tax return. The tax credit certificate shall contain the 12 taxpayer’s name, address, tax identification number, the date 13 of project completion, the amount of credit, other information 14 required by the department of revenue, and a place for the name 15 and tax identification number of a transferee and the amount 16 of the tax credit being transferred. Tax credit certificates 17 issued under this paragraph “b” may be transferred to any person 18 or entity. Within ninety days of transfer, the transferee 19 shall submit the transferred tax credit certificate to the 20 department of revenue along with a statement containing the 21 transferee’s name, tax identification number, and address, 22 and the denomination that each replacement tax credit 23 certificate is to carry and any other information required by 24 the department of revenue. Within thirty days of receiving 25 the transferred tax credit certificate and the transferee’s 26 statement, the department of revenue shall issue one or more 27 replacement tax credit certificates to the transferee. Each 28 replacement tax credit certificate must contain the information 29 required for the original tax credit certificate and must have 30 the same expiration date that appeared in the transferred 31 tax credit certificate. Tax credit certificate amounts 32 of less than the minimum amount established by rule of the 33 department of economic development shall not be transferable. 34 A tax credit shall not be claimed by a transferee under this 35 -3- SF 261 (3) 84 tw/sc 3/ 10

S.F. 261 paragraph “b” until a replacement tax credit certificate 1 identifying the transferee as the proper holder has been 2 issued. The transferee may use the amount of the tax credit 3 transferred against the taxes imposed in chapter 422, divisions 4 II , III , and V , and in chapter 432 , and against the moneys and 5 credits tax imposed in section 533.329 , for any tax year the 6 original transferor could have claimed the tax credit. Any 7 consideration received for the transfer of the tax credit shall 8 not be included as income under chapter 422, divisions II , III , 9 and V , under chapter 432 , or against the moneys and credits tax 10 imposed in section 533.329 . Any consideration paid for the 11 transfer of the tax credit shall not be deducted from income 12 under chapter 422, divisions II , III , and V , under chapter 13 432 , or against the moneys and credits tax imposed in section 14 533.329 . 15 Sec. 8. Section 422.7, subsection 9, Code 2011, is amended 16 to read as follows: 17 9. Subtract the amount of the alcohol fuel and cellulosic 18 biofuels credit allowable for the tax year under section 40 19 of the Internal Revenue Code to the extent that the credit 20 increased federal adjusted gross income. 21 Sec. 9. Section 422.33, subsection 5, paragraph f, Code 22 2011, is amended by striking the paragraph. 23 Sec. 10. Section 422.33, subsection 12, paragraph b, Code 24 2011, is amended to read as follows: 25 b. The taxes imposed under this division shall be reduced by 26 investment tax credits authorized pursuant to sections section 27 15.333 , 15A.9, subsection 4 , and section 15E.193B, subsection 28 6 . 29 Sec. 11. Section 422.35, subsection 7, Code 2011, is amended 30 to read as follows: 31 7. Subtract the amount of the alcohol fuel and cellulosic 32 biofuels credit allowable for the tax year under section 40 33 of the Internal Revenue Code to the extent that the credit 34 increased federal taxable income. 35 -4- SF 261 (3) 84 tw/sc 4/ 10

S.F. 261 Sec. 12. Section 422.36, subsection 4, Code 2011, is amended 1 to read as follows: 2 4. Foreign and domestic corporations shall file a copy of 3 their federal income tax return for the current tax year with 4 the return required by this section . 5 Sec. 13. Section 422.89, subsection 3, unnumbered paragraph 6 1, Code 2011, is amended to read as follows: 7 An amount equal to ninety one hundred percent of the tax for 8 the taxable year computed by placing on an annualized basis the 9 taxable income: 10 Sec. 14. REPEAL. Section 15A.9, Code 2011, is repealed. 11 Sec. 15. RETROACTIVE APPLICABILITY. The following 12 provision or provisions of this division of this Act apply 13 retroactively to January 1, 2011, for tax years beginning on 14 or after that date: 15 1. The section of this Act amending section 422.89. 16 DIVISION II 17 SALES TAXES 18 Sec. 16. Section 423.3, subsection 40, Code 2011, is amended 19 to read as follows: 20 40. The sales price from the sale of automotive fluids 21 to a retailer to be used either in providing a service which 22 includes the installation or application of the fluids in 23 or on a motor vehicle, which service is subject to section 24 423.2, subsection 6 , or to be installed in or applied to a 25 motor vehicle which the retailer intends to sell, which sale 26 is subject to section 423.26 321.105A . For purposes of this 27 subsection , automotive fluids are all those which are refined, 28 manufactured, or otherwise processed and packaged for sale 29 prior to their installation in or application to a motor 30 vehicle. They include but are not limited to motor oil and 31 other lubricants, hydraulic fluids, brake fluid, transmission 32 fluid, sealants, undercoatings, antifreeze, and gasoline 33 additives. 34 Sec. 17. Section 423.3, Code 2011, is amended by adding the 35 -5- SF 261 (3) 84 tw/sc 5/ 10

S.F. 261 following new subsection: 1 NEW SUBSECTION . 96. The sales price of fees charged for the 2 release of medical records as described in section 622.10. 3 Sec. 18. Section 423.36, subsection 3, paragraph a, Code 4 2011, is amended to read as follows: 5 a. The department shall grant and issue to each applicant 6 a permit for each place of business in this state where sales 7 or use tax is collected. A permit is not assignable and is 8 valid only for the person in whose name it is issued and for the 9 transaction of business at the place designated or at a place 10 of relocation within the state same county if the ownership 11 remains the same. 12 Sec. 19. Section 423.57, Code 2011, is amended to read as 13 follows: 14 423.57 Statutes applicable. 15 The director shall administer this subchapter as it relates 16 to the taxes imposed in this chapter in the same manner and 17 subject to all the provisions of, and all of the powers, 18 duties, authority, and restrictions contained in sections 19 423.14 , 423.15 , 423.16 , 423.17 , 423.19 , 423.20 , 423.21 , 423.22 , 20 423.23 , 423.24 , 423.25 , 423.28 , 423.29 , 423.31 , 423.32 , 423.33 , 21 423.34 , 423.34A , 423.35 , 423.37 , 423.38 , 423.39 , 423.40 , 22 423.41 , and 423.42 , section 423.43, subsection 1 , and sections 23 423.45 , 423.46 , and 423.47 . 24 Sec. 20. Section 622.10, subsection 5, paragraph c, Code 25 2011, is amended to read as follows: 26 c. Fees charged pursuant to this subsection are not subject 27 to a sales or use tax exempt from the sales tax pursuant 28 to section 423.3, subsection 96 . A provider providing the 29 records or images may require payment in advance if an itemized 30 statement demanding such is provided to the requesting party 31 within fifteen days of the request. Upon a timely request 32 for payment in advance, the time for providing the records or 33 images shall be extended until the greater of thirty days from 34 the date of the original request or ten days from the receipt 35 -6- SF 261 (3) 84 tw/sc 6/ 10

S.F. 261 of payment. 1 Sec. 21. REPEAL. Section 423.28, Code 2011, is repealed. 2 DIVISION III 3 PROPERTY TAXES 4 Sec. 22. Section 427B.4, Code 2011, is amended to read as 5 follows: 6 427B.4 Application for exemption by property owner. 7 1. a. An application shall be filed for each project 8 resulting in actual value added for which an exemption is 9 claimed. The first application for exemption shall be filed 10 by the owner of the property with the local assessor governing 11 body of the city or county in which the property is located by 12 February 1 of the assessment year in which the value added is 13 first assessed for taxation for which the exemption is first 14 claimed, but not later than the year in which all improvements 15 included in the project are first assessed for taxation, or the 16 following two assessment years . 17 b. Applications for exemption shall be made on forms 18 prescribed by the director of revenue and shall contain 19 information pertaining to the nature of the improvement, its 20 cost, the estimated or actual date of completion, whether the 21 exemption schedules described in section 427B.3 or an alternate 22 schedule adopted pursuant to section 427B.1 will be elected, 23 and any other information deemed necessary by the director of 24 revenue. 25 2. a. A person may submit a proposal to the city council 26 of the city or the board of supervisors of a county to receive 27 prior approval for eligibility for a tax exemption on new 28 construction. The city council or the board of supervisors, by 29 ordinance, may give its prior approval of a tax exemption for 30 new construction if the new construction is in conformance with 31 the zoning plans for the city or county. The prior approval 32 shall also be subject to the hearing requirements of section 33 427B.1 . 34 b. Prior approval received under this subsection does not 35 -7- SF 261 (3) 84 tw/sc 7/ 10

S.F. 261 entitle the owner to exemption from taxation until the new 1 construction has been completed and found to be qualified real 2 estate. However, if the tax exemption for new construction is 3 not approved, the person may submit an amended proposal to the 4 city council or board of supervisors to approve or reject. 5 Sec. 23. RETROACTIVE APPLICABILITY. This division of this 6 Act applies retroactively to January 1, 2011, for assessment 7 years beginning on or after that date. 8 DIVISION IV 9 MISCELLANEOUS 10 Sec. 24. Section 364.2, subsection 4, paragraph f, Code 11 2011, is amended to read as follows: 12 f. (1) A franchise fee assessed by a city may be based 13 upon a percentage of gross revenues generated from sales of the 14 franchisee within the city not to exceed five percent, without 15 regard to the city’s cost of inspecting, supervising, and 16 otherwise regulating the franchise. Franchise fees collected 17 pursuant to an ordinance in effect on May 26, 2009, shall be 18 deposited in the city’s general fund and such fees collected 19 in excess of the amounts necessary to inspect, supervise, and 20 otherwise regulate the franchise may be used by the city for 21 any other purpose authorized by law. Franchise fees collected 22 pursuant to an ordinance that is adopted or amended on or 23 after May 26, 2009, to increase the percentage rate at which 24 franchise fees are assessed shall be credited to the franchise 25 fee account within the city’s general fund and used pursuant 26 to section 384.3A . If a city franchise fee is assessed to 27 customers of a franchise, the fee shall not be assessed to the 28 city as a customer. Before a city adopts or amends a franchise 29 fee rate ordinance or franchise ordinance to increase the 30 percentage rate at which franchise fees are assessed, a revenue 31 purpose statement shall be prepared specifying the purpose or 32 purposes for which the revenue collected from the increased 33 rate will be expended. If property tax relief is listed as 34 a purpose, the revenue purpose statement shall also include 35 -8- SF 261 (3) 84 tw/sc 8/ 10

S.F. 261 information regarding the amount of the property tax relief to 1 be provided with revenue collected from the increased rate. 2 The revenue purpose statement shall be published as provided 3 in section 362.3 . 4 (2) If a city adopts, amends, or repeals an ordinance 5 imposing a franchise fee, the city shall promptly notify the 6 director of revenue of such action. 7 Sec. 25. Section 368.24, Code 2011, is amended to read as 8 follows: 9 368.24 Notification to public utilities and to the department 10 of revenue . 11 Notwithstanding any other provision of law to the contrary, 12 any city that annexes territory or any city from which 13 territory is severed shall provide written notification 14 consisting of a legal description and map of the annexed or 15 severed territory, each street address within the annexed 16 or severed area, where possible, a statement containing the 17 effective date of the annexation or severance and a copy of 18 the order, resolution, or ordinance proclaiming the annexation 19 or severance to all public utilities operating in the annexed 20 or severed area and to the department of revenue . If the 21 notification of the an annexation is provided to a public 22 utility less than sixty days prior to the effective date of the 23 annexation, the public utility shall have sixty days from the 24 date of notification to adjust its tax and accounting records 25 to reflect the annexation for any tax purpose. 26 Sec. 26. Section 424.2, subsections 6, 10, and 13, Code 27 2011, are amended to read as follows: 28 6. “Depositor” means the person who deposits petroleum into 29 an underground storage tank subject to regulation under chapter 30 455G or an aboveground petroleum storage tank as defined 31 in section 101.21 , located at a retail motor vehicle fuel 32 outlet if the aboveground storage tank is physically connected 33 directly to pumps which dispense petroleum that is sold at the 34 motor vehicle fuel outlet on a retail basis. 35 -9- SF 261 (3) 84 tw/sc 9/ 10

S.F. 261 10. “Owner or operator” means “owner or operator” of an 1 underground storage tank as used in chapter 455G or the “owner” 2 or “operator” of an aboveground petroleum storage tank as 3 defined in section 101.21 , located at a retail motor vehicle 4 fuel outlet if the aboveground storage tank is physically 5 connected directly to pumps which dispense petroleum that is 6 sold at the motor vehicle fuel outlet on a retail basis. 7 13. “Tank” means an underground storage tank subject to 8 regulation under chapter 455G or an aboveground petroleum 9 storage tank as defined in section 101.21 , located at a retail 10 motor vehicle fuel outlet if the aboveground storage tank is 11 physically connected directly to pumps which dispense petroleum 12 that is sold at the motor vehicle fuel outlet on a retail 13 basis. 14 -10- SF 261 (3) 84 tw/sc 10/ 10